Australia’s dollar is set to match its longest run of weekly declines against the greenback in seven years amid speculation the bigger nation’s Reserve Bank will take steps to curb a gain in the currency.
The Aussie dropped by the most in three months yesterday after RBA Governor Glenn Stevens said he remains “open-minded” on currency intervention. The kiwi strengthened against all 16 major peers today even after Reserve Bank of New Zealand Assistant Governor John McDermott said the nation’s currency is overvalued. Two-year swap rates in the country climbed to a two-year high on bets the RBNZ will raise borrowing costs.
“There is caution in the market that the RBA may cut rates if the Aussie strengthens,” said Daisaku Ueno, the chief currency strategist at Mitsubishi UFJ Morgan Stanley Securities Co. in Tokyo. “Both the RBA and RBNZ are trying to talk down the currencies, but the RBA has a bigger impact over the market, so the kiwi is being bought unfortunately as a result of Aussie selling.”